WEBVTT - Is This the End of the US Exceptionalism Trade? 0:00:02.480 --> 0:00:15.840 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.120 --> 0:00:21.680 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:21.760 --> 0:00:24.480 I'm Joe Wisenthal, and I'm Tracy Alloway. 0:00:24.400 --> 0:00:29.440 Tracy US exceptionalist. Like, to my mind, the big question 0:00:30.160 --> 0:00:34.040 for investors is, like we've had this fifteen year plus 0:00:34.240 --> 0:00:37.200 run of where it's like the only game in town 0:00:37.280 --> 0:00:40.159 has been you invested in the US, you did not 0:00:40.280 --> 0:00:43.520 get paid for diversification. Arguably, you didn't even get paid 0:00:43.520 --> 0:00:45.839 for diversification within the US because you should have just 0:00:45.880 --> 0:00:49.000 been in techtocs the entire time. Yeah, but I really 0:00:49.040 --> 0:00:52.239 feel like this is the moment where people are asking, like, 0:00:53.600 --> 0:00:56.400 is this one trade that's worked out so well? Is 0:00:56.440 --> 0:00:57.240 it coming to an end? 0:00:57.320 --> 0:00:59.360 You know what? I really like? I like talking about 0:00:59.400 --> 0:01:03.440 US exceptionalism in markets because no one immediately starts debating 0:01:03.600 --> 0:01:07.720 like the definition of US exceptionalism. That drives me crazy, 0:01:07.800 --> 0:01:11.720 right because in the broader realm of like just some 0:01:11.920 --> 0:01:14.640 politics or society or life, like, is the U s exciy? 0:01:14.680 --> 0:01:18.360 But in markets it's unambiguous. Yes, in markets it's unambiguous. 0:01:18.640 --> 0:01:21.720 The US assets have just been where you want to 0:01:21.760 --> 0:01:22.600 be for a long time. 0:01:22.680 --> 0:01:26.319 So not only have US equities outperformed recently, but they've 0:01:26.319 --> 0:01:29.480 really come to dominate the market as a whole, like 0:01:29.560 --> 0:01:32.800 as a proportion of the market. So the entire world, 0:01:33.000 --> 0:01:35.840 you know, even with US stocks falling recently, the entire 0:01:35.880 --> 0:01:38.880 world basically still has an overweight on America. 0:01:39.200 --> 0:01:41.759 The world is overweight. No, I mean, it's true, true. 0:01:41.760 --> 0:01:43.920 And if you're a global manager and your benchmark is 0:01:43.959 --> 0:01:47.200 the MSc, i AWS or whatever, you know, it's still 0:01:47.560 --> 0:01:49.880 in large party US trade. By the way, I was 0:01:49.880 --> 0:01:52.680 looking at the Bank of America Fund manager survey today, 0:01:52.680 --> 0:01:55.520 which is one of my favorites, and after two straight 0:01:55.640 --> 0:02:00.000 years of long mag seven being identified by fund manager 0:02:00.120 --> 0:02:03.000 Jersey is the perceived most crowded trade and this most 0:02:03.040 --> 0:02:05.720 recent month was gold, which was really interesting. 0:02:05.960 --> 0:02:08.280 So it's finally changed right after it. Yeah, that was 0:02:08.320 --> 0:02:10.080 the thing because like for years and years and years, 0:02:10.080 --> 0:02:14.320 everyone was like, oh fangs like big text, so crowded like, 0:02:14.760 --> 0:02:17.040 and the suggestion was don't even bother buying because the 0:02:17.120 --> 0:02:21.280 valuation is just so eyewatering at the moment. But in actuality, 0:02:21.360 --> 0:02:24.399 if you wanted to not even outperform, but like meet 0:02:24.400 --> 0:02:27.640 your benchmar that was the only trade was by tech. 0:02:27.800 --> 0:02:30.480 This is the true pain trade. Right, because it's like 0:02:30.520 --> 0:02:33.399 everybody is log tech, everybody is overweight tech. How could 0:02:33.400 --> 0:02:35.560 you make money buy tech? And yet you still had 0:02:35.600 --> 0:02:38.440 to buy tech just to keep up? And so now 0:02:38.480 --> 0:02:40.840 there's the question is the pain trade reverse? Because if 0:02:40.880 --> 0:02:43.000 there's so many people are so into tech and so 0:02:43.120 --> 0:02:46.440 into the US, can they actually make the risk and 0:02:46.520 --> 0:02:48.640 take the move of like, you know what, I'm going 0:02:48.720 --> 0:02:51.720 to overweigh Germany or I'm gonna buy Chinese stocks or 0:02:51.760 --> 0:02:54.680 whatever it is. And these are I think this is 0:02:54.720 --> 0:02:58.280 the moment where like you have to get this call right, 0:02:58.720 --> 0:02:59.840 This is the call of the. 0:02:59.800 --> 0:03:01.760 Moment, and you haven't really had to do that before. 0:03:01.919 --> 0:03:04.000 Now things are getting interested, right. 0:03:04.000 --> 0:03:06.200 We all know the backdrop of all this, so we 0:03:06.240 --> 0:03:08.280 don't really have to do that in the intro. But 0:03:08.840 --> 0:03:11.560 I'm very excited about our guests. We're still here in London. 0:03:11.560 --> 0:03:13.880 We are going to be speaking with Ozon Turman. Here's 0:03:13.919 --> 0:03:17.840 the vice chair of Global Macro at Deutsche Bank, and 0:03:17.880 --> 0:03:20.280 he talks and thinks about all of these questions with 0:03:20.360 --> 0:03:22.640 his clients all the time. They're going to get a 0:03:22.680 --> 0:03:25.079 slice of what he's thinking about. Ozon, thank you so much. 0:03:25.080 --> 0:03:26.920 Great to be here with you in person. 0:03:27.040 --> 0:03:29.720 Wonderful to be here. Honestly, I'm a big fan. I 0:03:29.760 --> 0:03:31.520 listen to you guys all the time. My clients and 0:03:31.600 --> 0:03:34.320 friends are big fens. Is great to be here. This 0:03:34.400 --> 0:03:35.240 is my hometown. 0:03:35.880 --> 0:03:38.640 This is very important to us. I say that we're 0:03:38.680 --> 0:03:41.600 sorry when no guests say this on the episode. We 0:03:41.640 --> 0:03:44.120 hate when they say it before the recording starts. He's like, 0:03:44.160 --> 0:03:46.440 that was a total waste. Do you agree with the 0:03:46.480 --> 0:03:50.040 premise that I set up that this is essentially the 0:03:50.120 --> 0:03:52.920 big question that everyone has to grapple with right now? 0:03:52.920 --> 0:03:53.520 In markets? 0:03:53.640 --> 0:03:55.880 We fought with doubts and quite tiringly. 0:03:57.320 --> 0:03:59.360 Sorry to exhausted, We're exhausted too. 0:03:59.520 --> 0:04:02.520 I mean we were very exhausted after deliberation day, but 0:04:02.760 --> 0:04:06.640 even before all that, we were exhausted from how wrong 0:04:06.720 --> 0:04:10.560 the whole jen to Gen twenty consensus went. Everybody and 0:04:10.600 --> 0:04:13.720 their brother were believing SMP would go anywhere between seven 0:04:13.760 --> 0:04:17.440 thousand to six thousand, five hundreds and ty US ten 0:04:17.520 --> 0:04:20.080 year would go to five percent. It kind of did, 0:04:20.160 --> 0:04:23.000 but for all the wrong reasons. And then Eurote the 0:04:23.000 --> 0:04:27.400 other right and everybody who's saying parity believe me politely, 0:04:27.480 --> 0:04:29.719 deep inside, they were believing zero point ninety five that 0:04:29.800 --> 0:04:33.160 dollar CNH would go to eight. I can go on 0:04:33.200 --> 0:04:37.799 and on and why right, First of all, this US exceptionalism, 0:04:37.880 --> 0:04:39.839 we can go into take it as well, But first 0:04:39.839 --> 0:04:44.160 and foremost it was about fiscal expansion. US was the one, 0:04:44.560 --> 0:04:48.279 the big one, printing the most, especially after the Homerican 0:04:48.960 --> 0:04:53.480 and on top yes, the Magnificent Seven, the wonderful Silicon 0:04:53.560 --> 0:04:59.839 Valley story, and belief that Germany, Europe and China, for 0:05:00.040 --> 0:05:05.279 different reasons, would never match the same fiscal ambitions. All 0:05:05.320 --> 0:05:08.560 these three things I mentioned are completely turned on their heads. 0:05:09.400 --> 0:05:13.239 From deep seek to Germany's one in fact one point 0:05:13.240 --> 0:05:17.720 one trillion, to China holding onto their currency and choosing 0:05:17.720 --> 0:05:22.599 more fiscal all the consensus traits and views are thrown 0:05:22.640 --> 0:05:23.200 into the water. 0:05:23.680 --> 0:05:27.000 It is true. In January we recorded that episode with 0:05:27.120 --> 0:05:29.960 the ECB's chief economist and it was basically about all 0:05:30.000 --> 0:05:33.599 the challenges facing Europe. And then like two months later, 0:05:33.800 --> 0:05:37.880 European stocks are surging. Everyone's getting very excited about that market. 0:05:38.720 --> 0:05:42.159 I have what I imagine might be a difficult question, 0:05:42.240 --> 0:05:44.280 but maybe it's not for you. How much of this 0:05:44.440 --> 0:05:47.839 has to do with things being really bad in the 0:05:47.920 --> 0:05:52.320 States versus things actually going well in Europe? 0:05:52.440 --> 0:05:54.200 I really like that question. It's not a difficult question. 0:05:54.240 --> 0:05:57.200 Actually it's a key question. At the very beginning of 0:05:57.240 --> 0:05:59.000 the year, it was more about the rest of the 0:05:59.040 --> 0:06:02.760 world doing such better than expected. Germany step is a 0:06:02.839 --> 0:06:06.760 huge step. After the election, I held a micro dinners 0:06:06.800 --> 0:06:10.599 in Frankfurt, as you do, and both are big cheeses. 0:06:10.680 --> 0:06:12.960 And some of our key clients really did not see 0:06:12.960 --> 0:06:15.960 this coming. Maybe three hundred billion, maybe four hundred billion, 0:06:16.240 --> 0:06:21.160 mainly on defense after the shocking mini but infrastructure, health, 0:06:21.279 --> 0:06:24.479 education was hardly mentioned. Something like one point one trillion. 0:06:25.360 --> 0:06:27.640 My head of rates trading was throwing that out as 0:06:27.680 --> 0:06:31.680 an idea, which was quickly pushed back. Then the Hamburg 0:06:31.760 --> 0:06:34.760 local elections happened and right away Merz came up with 0:06:34.800 --> 0:06:39.640 that numbers and before the new parliament sets in. That's 0:06:40.080 --> 0:06:42.400 sometimes these words hyper bowls are used too much, but 0:06:42.520 --> 0:06:46.839 that was a historic step on top of China deep seek. 0:06:46.920 --> 0:06:49.080 That was a big, big development. I mean I was 0:06:49.160 --> 0:06:51.440 jumping up and down on my Bloomberg on Saturday and 0:06:51.440 --> 0:06:54.800 Sunday of that weekend. Whatever you want to believe. I mean, 0:06:54.839 --> 0:06:56.599 maybe they'll do it for five, maybe they do it 0:06:56.640 --> 0:06:59.240 for fifty. They definitely don't do it for two billion 0:06:59.279 --> 0:07:03.040 or one trillion, right, So Deep Seek will change the 0:07:03.080 --> 0:07:07.279 world for Magnificent seven and all of us consumers. But 0:07:07.360 --> 0:07:11.160 then to Tracy's question, recently it's becoming more about us 0:07:11.280 --> 0:07:15.920 hurting itself, us hurting its soft power, US creating a 0:07:15.960 --> 0:07:19.560 confidence crisis in a way. With full respect to Scott Bessant, 0:07:20.320 --> 0:07:22.800 who's been a dear client friend as well, who's been 0:07:23.280 --> 0:07:25.480 to some of my New York mac readiners, when he 0:07:25.560 --> 0:07:30.560 says what mag seven goes through a court has got 0:07:30.600 --> 0:07:32.960 nothing to do with Mega is more about a deep 0:07:33.000 --> 0:07:36.160 seak issue, I would kindly disagree with that. Of course, 0:07:36.200 --> 0:07:39.760 Deep Seek, as I told you, has got many factors 0:07:39.800 --> 0:07:43.800 to do with it, but Tariff's much more than people expected, 0:07:44.400 --> 0:07:47.080 ended up shooting us on its own leg. 0:07:47.440 --> 0:07:50.240 Is Deep Seek about deep seak or is it a 0:07:50.320 --> 0:07:53.840 metonym for the rise of competitive Chinese tech? 0:07:54.000 --> 0:07:56.760 I think more for the letter, But my friends that 0:07:56.840 --> 0:08:01.800 I do trust in beyond the market yours from the 0:08:01.840 --> 0:08:04.560 start believed that it was It was real. Some things, 0:08:04.560 --> 0:08:07.800 it did much better than Chatchibt, and I think us 0:08:07.840 --> 0:08:10.200 since it has given me my education as well. The 0:08:10.240 --> 0:08:12.600 first reaction to it was the US. I know this 0:08:12.760 --> 0:08:15.160 is for real, it may help all of us. Let's compete. 0:08:15.680 --> 0:08:20.280 So in that sense it was good for humanity as well. 0:08:20.280 --> 0:08:22.240 But yes, that was the first step in the in 0:08:22.280 --> 0:08:24.600 this year in which China said hey, I'm here. Then 0:08:24.640 --> 0:08:27.960 the second big step was last Wednesday, I mean Joint 0:08:28.000 --> 0:08:32.679 Tracey last Wednesday, unfortunately, five six hours before this, when 0:08:32.720 --> 0:08:35.000 I woke up to see the China fix to see 0:08:35.000 --> 0:08:37.160 if they devalued big or not. And when I was 0:08:37.280 --> 0:08:40.200 leave to see they haven't, then I looked at US 0:08:40.240 --> 0:08:43.240 ten year as you do, and Euro dollar and then 0:08:43.559 --> 0:08:45.280 I didn't unfortunately sleep why. 0:08:45.080 --> 0:08:47.040 Because I didn't sleep that either. I was on my 0:08:47.120 --> 0:08:50.840 couch updating my Bloomberg gap on my phone, just looking at. 0:08:50.679 --> 0:08:53.160 Ten Imagine imagine if we did this one week, because 0:08:53.280 --> 0:08:56.520 US ten year had gone to four to fifty five 0:08:57.040 --> 0:09:00.600 and at the same time dollar was weakening. So even 0:09:00.920 --> 0:09:04.559 that Sunday, three days ago, I kind of knew this 0:09:04.720 --> 0:09:07.080 was the vibe. Some people were really worried about it, 0:09:07.160 --> 0:09:10.040 but I didn't see. I didn't see in two days 0:09:10.600 --> 0:09:13.240 dollar melting like that, and at the same time US 0:09:13.320 --> 0:09:17.760 long ends being basically lost ten and thirty. That is 0:09:17.840 --> 0:09:21.280 my troa. I grew up in emerging markets. My first 0:09:21.400 --> 0:09:24.800 responsibility was emerging markets again, no more hyperbole. That was 0:09:24.880 --> 0:09:29.160 emerging markets like trading that stage, you know, I almost 0:09:29.240 --> 0:09:33.320 wanted to shout out responsibility, like almost like an AMC 0:09:33.440 --> 0:09:36.160 to the market. Somebody needs to blink, somebody needs to come. 0:09:36.880 --> 0:09:40.439 I thought it could be fed and right that afternoon 0:09:40.920 --> 0:09:42.719 President blinked for the first time. Yeah. 0:09:43.240 --> 0:09:46.559 You know what else was very emerging markets e that week, 0:09:46.760 --> 0:09:49.800 you know, having policymakers calling for rate cuts when the 0:09:49.840 --> 0:09:52.120 dollar was falling and yields were growing up, like that 0:09:52.240 --> 0:09:53.959 is classic EM right, Well, I. 0:09:54.000 --> 0:09:56.440 Was thinking that if we were classic EM, wouldn't be 0:09:56.640 --> 0:10:00.720 IMF peoples be calling for rate hikes and cuts in 0:10:00.760 --> 0:10:03.000 that environment? Would they say, oh, you know, you need 0:10:03.040 --> 0:10:07.199 an independent central bank that like is committed to orthodoxy. 0:10:07.280 --> 0:10:08.400 You got a hike at these. 0:10:08.280 --> 0:10:13.319 Environment that, my friend, you guys are in London, We're honored. That, unfortunately, 0:10:13.480 --> 0:10:15.360 is the trust moment. We went through that in this 0:10:15.600 --> 0:10:19.480 island just three years ago. But even then, at the 0:10:19.520 --> 0:10:24.160 height of the panic, when quite justifiably somewhere calling for 0:10:24.200 --> 0:10:28.480 a hike, Bank of England instead chose que. At that 0:10:28.600 --> 0:10:30.720 time as well, people said, oh that may be inflation 0:10:30.840 --> 0:10:33.480 at the end, et cetera. But that ended up calming 0:10:33.520 --> 0:10:37.400 things down. I do believe, first of all, last week, 0:10:37.480 --> 0:10:41.600 if President didn't blink and tan year and thirty content 0:10:41.720 --> 0:10:43.760 to sell off with the dollars selling off em style, 0:10:44.679 --> 0:10:47.040 I think FED would have come definitely, and the QT 0:10:47.240 --> 0:10:48.679 I mean that we can talk about that. I think 0:10:48.679 --> 0:10:50.200 that they will do that right away in May anyway. 0:10:50.559 --> 0:10:52.559 But I think they would do q E as well, 0:10:52.720 --> 0:10:54.960 not cut. I think probably doesn't want to cut because 0:10:55.000 --> 0:10:59.640 of all the inflation growth dynamics, but they would have 0:10:59.679 --> 0:11:01.640 done that. And I don't agree with some of my 0:11:01.720 --> 0:11:05.400 dear client friends who say even QE inflationary wouldn't long 0:11:05.520 --> 0:11:08.000 and react to that even more. Maybe they are kindly 0:11:08.000 --> 0:11:10.719 talking their book if we have. If you go through 0:11:10.760 --> 0:11:13.600 that kind of episode, a QE may calm things down. 0:11:14.240 --> 0:11:18.080 But Trump blinked two or three times, so I'm not 0:11:18.200 --> 0:11:22.880 too sure. Famous last words, we'll go through that fat 0:11:23.000 --> 0:11:27.200 QI stage. Now. There's a big, big, big debate already 0:11:27.240 --> 0:11:29.959 in the market. Even though my dear friends are tighter 0:11:30.000 --> 0:11:34.080 than and wounded, do you play for the next leg 0:11:34.160 --> 0:11:38.640 to come one more quote unquote attack towards four fifty 0:11:38.679 --> 0:11:41.000 and higher in US ten year much more importantly five 0:11:41.000 --> 0:11:45.760 percent and higher in thirty years. Or do recession warriors 0:11:45.840 --> 0:11:51.720 and growth warries always outweigh Is it now when warriors peak? 0:11:51.840 --> 0:11:54.400 Is it now time to receive I kind of have 0:11:54.440 --> 0:11:58.040 a lean towards this the letter, and it has won 0:11:58.120 --> 0:12:00.560 by twenty five base points as I speak, So something 0:12:00.600 --> 0:12:01.120 may have become. 0:12:16.960 --> 0:12:18.600 One of the reasons we wanted to talk to you 0:12:18.720 --> 0:12:22.600 is because you are constantly speaking and arguing over these 0:12:22.640 --> 0:12:26.320 trading ideas with your clients. And I guess I'm curious 0:12:26.320 --> 0:12:29.400 about the arguing. Yes, I guess I'm curious. Is anyone 0:12:29.559 --> 0:12:34.200 buying the Trump administration argument that like, Okay, we're taking 0:12:34.240 --> 0:12:39.240 some short term pain in exchange for longer term better 0:12:39.360 --> 0:12:42.480 economic growth. Is that something that people like are actually 0:12:43.080 --> 0:12:46.120 positioning for. Is that resonating at all with your clients? 0:12:46.240 --> 0:12:50.760 Again, very good question. Up until mid February end of February, 0:12:51.600 --> 0:12:53.800 a lot of them did. Now, we don't think about it, 0:12:53.800 --> 0:12:56.440 but you know, you're at one, thirteen, one fifteen back 0:12:56.480 --> 0:12:59.440 then told even one ten year old was like, come on, 0:12:59.520 --> 0:13:01.760 you know, calm down, et cetera. Because people did believe 0:13:02.000 --> 0:13:05.120 tariffs have to be inflationary. Market is not believing market 0:13:05.160 --> 0:13:07.720 is not pricing it, that's why it's not happening, et cetera, 0:13:07.760 --> 0:13:11.600 et cetera. Then credibility started to become an issue when 0:13:11.600 --> 0:13:15.160 you start with Canada and Mexico, and when you don't 0:13:15.200 --> 0:13:19.360 mention China that much, then you decide to do something 0:13:19.400 --> 0:13:22.959 on Canada and Mexico even though market and most economists 0:13:22.960 --> 0:13:26.960 are revolting. You immediately step back, delayed for one month. 0:13:27.080 --> 0:13:31.360 You start losing credibility. Then people start relaxing about deliberation. 0:13:31.480 --> 0:13:34.480 Day you come up with this big sign with very 0:13:34.640 --> 0:13:39.120 you know, let's say creative way of calculating it, and 0:13:39.160 --> 0:13:41.720 you hit China and Asia the most. Then people say 0:13:41.920 --> 0:13:43.319 there's a credibility year. 0:13:43.640 --> 0:13:46.360 Actually this reminds me because you and I met for 0:13:46.440 --> 0:13:49.680 coffee in New York City like three or four weeks ago, 0:13:50.040 --> 0:13:52.120 and I think one of the comments at the time 0:13:52.400 --> 0:13:55.760 and now that this seems like ancient history, but the 0:13:55.840 --> 0:13:58.520 thinking at the time was like, oh, it's interesting. Trump 0:13:58.679 --> 0:14:02.000 is hammering care in Mexico a lot more rhetorically than 0:14:02.040 --> 0:14:04.440 he has China. Maybe he's gonna go easy on China. 0:14:04.480 --> 0:14:06.920 And I had forgotten that that was actually in the 0:14:06.960 --> 0:14:08.680 discourse even like three weeks ago. 0:14:09.200 --> 0:14:11.160 I do remember our conversation as well, and you made 0:14:11.200 --> 0:14:14.880 me think too because when I said, I still believe, like, look, 0:14:15.000 --> 0:14:19.119 I think for this year, this yours, us ex exceptions 0:14:19.160 --> 0:14:21.320 in trade is here to stay. It's not just a 0:14:21.360 --> 0:14:23.400 one quarter thing. Because that I heard a lot as well, 0:14:23.440 --> 0:14:26.040 was on good call. We like your blue mega hat, 0:14:26.160 --> 0:14:28.000 but it's just one month, it's just two months. This 0:14:28.120 --> 0:14:30.000 is just three months. Yea, well now it's one fifteen, 0:14:30.040 --> 0:14:33.880 et cetera. But then you told me, look, China, they're 0:14:33.920 --> 0:14:36.360 doing a lot better in ev and solar, they're tried 0:14:36.440 --> 0:14:40.040 starting to do better in in tech, in fiscal, so 0:14:40.080 --> 0:14:42.560 maybe we are not that exceptional after all you had 0:14:42.560 --> 0:14:45.920 told me. And then also on that going easy on China, 0:14:46.040 --> 0:14:49.520 he was trying to hide these cards. Then he went 0:14:50.000 --> 0:14:54.000 seventh years. But China is playing a good one if 0:14:54.320 --> 0:14:56.320 a lot of people back to that Wednesday when we 0:14:56.360 --> 0:14:59.040 didn't sleep, a lot of people fear that either that 0:14:59.240 --> 0:15:02.600 Wednesday or that Thursday, China would be value big. To 0:15:02.640 --> 0:15:05.840 be fair to both my research and trading Perry Malica, 0:15:06.240 --> 0:15:08.800 we really believe that people shouldn't exaggerate. They would hold 0:15:08.880 --> 0:15:10.560 they would hold the ground. And it was to their 0:15:10.640 --> 0:15:15.560 advantage to choose fiscal more so far so right that, 0:15:15.640 --> 0:15:21.120 and that also proving making things quite difficult for the president, 0:15:21.320 --> 0:15:23.800 Like even this morning, right I opened up, Okay, it's 0:15:23.840 --> 0:15:27.600 more colorful for Tracy and Joe. Not wonderful, but SMP 0:15:27.720 --> 0:15:30.440 down seventeen as back down three hundred and fifty. And 0:15:30.520 --> 0:15:33.560 then as I was walking to the tube, China may 0:15:33.640 --> 0:15:36.680 talk to you, guys if you show respect immediately smally 0:15:36.720 --> 0:15:37.440 seventy points. 0:15:37.560 --> 0:15:41.040 By the way for listeners. We were recording this Wednesday, 0:15:41.080 --> 0:15:44.520 April sixteenth. It is ten fifty eight London time, five 0:15:44.640 --> 0:15:46.800 fifty eight New York City time. We always have to 0:15:46.800 --> 0:15:47.280 get these in. 0:15:47.560 --> 0:15:47.720 Yeah. 0:15:47.760 --> 0:15:49.680 I think it's so funny. We actually have to include 0:15:49.680 --> 0:15:53.160 the exact time now, which we didn't have to do before. 0:15:53.240 --> 0:15:55.760 You usuld just do days. Yeah. I like that before ECB, 0:15:55.920 --> 0:15:57.600 before Pubble sticks in Chicago. 0:15:57.880 --> 0:16:01.280 Yeah, exactly. Well, okay, So on the tech front, one 0:16:01.280 --> 0:16:03.800 thing I don't get is so much of the American 0:16:03.840 --> 0:16:07.520 exceptionalism trade has been about AI enthusiasm and this idea 0:16:07.560 --> 0:16:11.480 that America has a head start and no real competitors, 0:16:11.520 --> 0:16:15.520 at least up until the unleashing slash arrival of Deep 0:16:15.560 --> 0:16:21.160 Seek in Europe. We still haven't really seen a real 0:16:21.200 --> 0:16:23.680 contender in the AI space. I think that's fair to say, 0:16:24.040 --> 0:16:27.640 And there has been this long running disappointment that Europe 0:16:27.680 --> 0:16:30.920 is just not where other places like the US and 0:16:31.040 --> 0:16:34.160 China are when it comes to cutting edge technology. That 0:16:34.320 --> 0:16:36.600 hasn't changed as far as I can tell, but it 0:16:36.600 --> 0:16:39.560 seems like investors are kind of willing to overlook that. 0:16:39.920 --> 0:16:45.320 Or maybe they think that US isolationist political policy and 0:16:45.360 --> 0:16:47.040 the idea that Europe is going to have to come 0:16:47.120 --> 0:16:51.440 together to fight Russia and you make up for a 0:16:51.560 --> 0:16:53.840 less active US. Maybe that's going to be the thing 0:16:53.880 --> 0:16:56.480 that sparks technological advance a. 0:16:56.440 --> 0:16:59.440 Bit of both. I think, first of all, especially Germany, 0:16:59.440 --> 0:17:01.920 about Europe can invent itself. That's going to take a 0:17:01.960 --> 0:17:06.080 little bit of time. In the meantime, things like ARNI media, 0:17:06.200 --> 0:17:08.880 so things like lvmh airms have to carry outs which 0:17:08.920 --> 0:17:13.080 didn't happen yesterday because of what's going on with China, 0:17:13.600 --> 0:17:17.639 so it will need time. At the moment, Europe does AI, 0:17:17.760 --> 0:17:20.520 but does the chips, like the part of the chips 0:17:20.520 --> 0:17:24.240 that helps the asmls and tsmcs of the world. Germany 0:17:24.240 --> 0:17:27.840 doesn't necessarily have its own asml SO. But at the 0:17:27.880 --> 0:17:30.720 same time, yeah, this is a country, at least the 0:17:30.760 --> 0:17:34.159 country Germany, but overall continent that has shown that it 0:17:34.200 --> 0:17:37.840 can reinvent itself. It's not going to happen in two 0:17:37.920 --> 0:17:41.080 three months. But all these for the pass, all these 0:17:41.920 --> 0:17:46.719 unforced errors America is making, is giving the old continent sometime. 0:17:47.359 --> 0:17:52.840 Europe is arguably now the leading I mean with that 0:17:53.320 --> 0:17:57.640 clearly the most advanced place in the world for aerospace technology. 0:17:57.720 --> 0:18:01.399 And we had those headlines today. Are sorry yesterday about 0:18:01.480 --> 0:18:05.959 China halting deliveries of Boeing. Already Boeing was falling behind 0:18:06.080 --> 0:18:10.320 airba Is, largely due to operational problems. There is clearly 0:18:10.359 --> 0:18:14.840 still some just sort of like classical industrial might on 0:18:15.000 --> 0:18:18.800 the continent. Much of an aerospace probably you know, engines, 0:18:18.840 --> 0:18:23.320 other parts that feel like areas for potential further growth. 0:18:24.160 --> 0:18:28.240 Agreed. Look, I go back and forth between three categories. 0:18:28.240 --> 0:18:32.199 Two categories. Category one is you know, after having a 0:18:32.240 --> 0:18:35.119 great four month, I'll be wrong. US exceptionalism will be 0:18:35.160 --> 0:18:38.800 fully back. This was all a joke America, America. Yeah. 0:18:38.880 --> 0:18:43.960 Category two for reasons like you outlined, Europe European industrialism, 0:18:44.520 --> 0:18:47.720 China will continue to lead the lead the pack. To 0:18:47.800 --> 0:18:50.480 be honest, it's going much better than I would have taught. 0:18:50.520 --> 0:18:53.119 This much outperformance didn't happened since nineteen eighty, et cetera. 0:18:53.840 --> 0:18:57.199 It's going to be continued team and Category three USA 0:18:57.280 --> 0:18:59.720 in America will take everything down. It will be such 0:18:59.720 --> 0:19:02.520 a sea is confidence the market crisis that with all 0:19:02.520 --> 0:19:07.000 the respect to European aerospace, is that the Danish. 0:19:06.960 --> 0:19:08.600 Kill Globar place. 0:19:09.600 --> 0:19:13.280 I go back on how can you not you go 0:19:13.359 --> 0:19:17.720 back and forth these three or two categories. My gut 0:19:17.800 --> 0:19:20.879 feel and reasoning still is that category to the broad 0:19:20.880 --> 0:19:23.960 team of twenty twenty five will win because why I 0:19:24.000 --> 0:19:27.919 think President will continue to blink. And also I have 0:19:27.960 --> 0:19:32.240 a backstop now. I do believe if things get very 0:19:32.320 --> 0:19:36.119 ugly five percent and more US thirty or ugly in 0:19:36.280 --> 0:19:39.159 US said will come with with Q At this Collins 0:19:39.400 --> 0:19:42.680 last Friday, she gave a hint. She said the one 0:19:42.720 --> 0:19:45.840 more world fear ambitiously whatever the world. She didn't just 0:19:45.840 --> 0:19:49.040 say watching We're definitely what she was the first one 0:19:49.040 --> 0:19:51.680 to give. Most investors believe that they could come with 0:19:51.720 --> 0:19:55.560 more steps. And then Waller. I know that now Waller 0:19:55.720 --> 0:19:58.439 people are half joking about is he really saying it 0:19:58.520 --> 0:20:01.240 or is he love being for the job? Yeah, yeah, 0:20:01.440 --> 0:20:04.040 but he's you know, he's I think he does believe it. 0:20:04.080 --> 0:20:07.200 He's a respected man, and he did hint that cuts 0:20:07.200 --> 0:20:10.720 can be frontloaded if things get uglier. So, first of all, 0:20:10.720 --> 0:20:13.560 I believe blinks will continue from the White House. But 0:20:14.040 --> 0:20:16.119 even if they don't, I think we have the backing 0:20:16.160 --> 0:20:17.920 of the of the FED. 0:20:18.440 --> 0:20:20.320 You know, I mentioned in the intro this idea that 0:20:20.359 --> 0:20:23.520 the world has sort of de facto overweight the US 0:20:23.600 --> 0:20:27.040 just because of the it's the market size and it's 0:20:27.119 --> 0:20:30.600 waiting in a bunch of different benchmarks. Does that provide 0:20:30.640 --> 0:20:34.879 like some cushion for US equities selling off, like the 0:20:34.920 --> 0:20:38.000 fact that you do have index investors, passive investors that 0:20:38.160 --> 0:20:41.480 have to be hugging a certain benchmark which happens to 0:20:41.600 --> 0:20:43.920 be filled with a lot of American equities. 0:20:44.920 --> 0:20:48.480 Completely agreed exactly, Tracy. In a simple way of putting it. 0:20:48.520 --> 0:20:51.560 I was discussing with a senior colleague yesterday. This is 0:20:51.560 --> 0:20:54.000 great because let's go right into that real location, the 0:20:54.040 --> 0:20:58.879 big team. Right, if big players were really in the 0:20:58.920 --> 0:21:02.000 big sense of the world with a big r reallocating 0:21:02.119 --> 0:21:04.399 away from the US, there will be a lot of 0:21:04.440 --> 0:21:07.080 circuit breakers in a SMP. I don't want to sound, 0:21:07.600 --> 0:21:10.479 but that is the know it would be. I'm not 0:21:10.520 --> 0:21:14.080 sure how SMP would open tomorrow morning. So there's a 0:21:14.080 --> 0:21:19.320 difference between even these big real money so well funds 0:21:19.359 --> 0:21:23.159 trading in their own time zone and making much bigger, 0:21:23.280 --> 0:21:27.520 much longer dated decisions. So I think this letter it's more. 0:21:28.359 --> 0:21:31.720 We do want headlines, especially of emerging markets effects people. 0:21:31.760 --> 0:21:36.639 We do get excited, but through through through big reallocation, 0:21:36.800 --> 0:21:39.680 I don't think we're there yet. That being said, there 0:21:39.680 --> 0:21:43.119 are trades, so this big it's not just my wonderful 0:21:43.240 --> 0:21:47.600 dhe funds friends fast money getting what's the world trump 0:21:47.680 --> 0:21:52.080 us queasy, It's beyond its yippy, it's it's it's more 0:21:52.119 --> 0:21:52.760 serious than that. 0:21:52.920 --> 0:21:55.760 Yeah, No, Tracy wrote a great note about that yesterday 0:21:55.800 --> 0:21:57.600 or the day before. I can't track. It's like there's 0:21:57.640 --> 0:22:01.480 like real money, real money actually moving away. 0:22:01.760 --> 0:22:01.960 You know. 0:22:02.800 --> 0:22:07.480 Everyone looks for analogies to pass experiences, and this like 0:22:07.600 --> 0:22:10.280 is this like great financial crisis? Is there like a 0:22:10.359 --> 0:22:13.160 run element? Is this like COVID where it's a supply shop? 0:22:13.320 --> 0:22:16.679